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 David Epstein, the American head of Novartis Pharmaceuticals and a
27-year veteran with the group, will leave the company to "explore
new challenges from the U.S.", Novartis said.
Epstein's re-location to the United States implies he is not in the
running to replace Andrew Witty as chief executive of British
drugmaker GlaxoSmithKline next year, as some have speculated. GSK
has said it expects to choose a new CEO towards the end of the 2016.
Novartis' reorganization of its main drugs unit, which accounts for
about two-thirds of its $49 billion in annual sales, shows the
growing importance of oncology to the company, after it bought GSK's
marketed cancer drugs for $16 billion last year.
It comes as Novartis struggles with the patent expiration of blood
cancer drug Glivec and slower-than-expected revenue from its new
heart failure medicine, Entresto.
Epstein is the second high-ranking Novartis official to exit within
months. Ex-Hospira chief Michael Ball replaced Jeff George at the
company's struggling Alcon eye care business in January as its sales
declined again.
"Novartis expects this change to help drive our growth and
innovation strategy, with an increased focus and improved
execution," the company said in a statement.
"The new structure reflects the importance of oncology to Novartis
following the successful integration of the oncology assets acquired
from GlaxoSmithKline."
Industry analysts said the division should improve the transparency
of the component parts of the drugmaker's business and could help
convince investors of the value of Novartis' large oncology
operations.
Cancer drugs tend to enjoy high profit margins and the therapy area
is highly valued by investors at present, thanks to recent advances
in fighting the disease and the premium prices commanded by cancer
treatments.
"A split makes sense because oncology now has critical mass,
following the GSK deal, and oncology is in many ways becoming a
differentiated business from the rest of pharmaceuticals," said Mick
Cooper, an analyst at equity research firm Trinity Delta.
HEART DRUG FALLS SHORT
Epstein, who took over the pharmaceuticals division in 2010, will be
replaced by two people.
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Paul Hudson, currently AstraZeneca's North America head, will run
the pharmaceuticals business, and Bruno Strigini, head of Novartis
Oncology, will lead the newly created oncology business unit.
A Novartis spokesman said on Tuesday the divisional reshuffle will
not result in "big costs", though he did not name a figure.
Additionally, a small number of jobs will be moved as part of the
changes to the Basel headquarters from Novartis facilities in New
Jersey in the United States.
An AstraZeneca spokesman said Hudson had made a positive impact
during his time at the British company and his decision was a
personal one. He declined to comment further.
Novartis shares have fallen 16 percent this year, due in part to
disappointment over the performance of Entresto, which had been
hailed by Epstein as a breakthrough for heart failure but has fallen
well short of sales expectations.
Novartis still expects the drug will eventually top $5 billion in
annual sales, but Epstein disappointed analysts earlier this year
when he said 2016 sales would be just $200 million, far lower than
estimates, as insurance companies resist paying and U.S. doctors are
slow to prescribe.
Novartis said last month it was increasing the marketing push behind
Entresto and hiring more sales people to get over the slow take-up.
Before taking over at Novartis Pharmaceuticals six years ago,
Epstein was in charge of the group's cancer portfolio. He originally
joined Sandoz, one of the drug companies that merged to form
Novartis, in 1989.
(Reporting by John Miller, editing by Susan Thomas and Alexandra
Hudson)
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